<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(x) Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended: December 31, 1996
or
( ) Transition Report Pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934
Commission file number: 0-23240
ML GLOBAL HORIZONS L.P.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-3716393
- ------------------------------- --------------------------
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
c/o Merrill Lynch Investment Partners Inc.
Merrill Lynch World Headquarters
World Financial Center
South Tower, 6th Floor, New York, NY 10080-6106
-----------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (212) 236-4167
Securities registered pursuant to Section 12(b) of the Act: None
<TABLE>
<S> <C>
Securities registered pursuant to Section 12(g) of the Act: Limited Partnership Units
-------------------------
(Title of Class)
</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
---- ----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
Aggregate market value of the voting stock held by non-affiliates: the
registrant is a limited partnership and, accordingly, has no voting stock held
by non-affiliates or otherwise.
Documents Incorporated by Reference
The registrant's "1996 Annual Report and Independent Auditors' Report," the
annual report to security holders for the fiscal year ended December 31, 1996,
is incorporated by reference into Part II, Item 8, and Part IV hereof and filed
as an Exhibit herewith.
1
<PAGE>
ML GLOBAL HORIZONS L.P.
ANNUAL REPORT FOR 1996 ON FORM 10-K
Table of Contents
-----------------
<TABLE>
<CAPTION>
PART I PAGE
------ ----
<S> <C> <C>
Item 1. Business...................................................................................... 1
Item 2. Properties.................................................................................... 7
Item 3. Legal Proceedings............................................................................. 8
Item 4. Submission of Matters to a Vote of Security Holders........................................... 8
PART II
-------
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters......................... 8
Item 6. Selected Financial Data....................................................................... 9
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations......... 11
Item 8. Financial Statements and Supplementary Data................................................... 14
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.......... 14
PART III
--------
Item 10. Directors and Executive Officers of the Registrant............................................ 14
Item 11. Executive Compensation........................................................................ 16
Item 12. Security Ownership of Certain Beneficial Owners and Management................................ 16
Item 13. Certain Relationships and Related Transactions................................................ 17
PART IV
-------
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K............................... 18
</TABLE>
-i-
<PAGE>
PART I
Item 1: BUSINESS
(a) General Development of Business:
-------------------------------
ML Global Horizons L.P. (the "Partnership" or the "Fund") was
organized under the Delaware Revised Uniform Limited Partnership Act on May 11,
1993 and began trading operations on January 4, 1994. The Partnership trades in
the international futures and forward markets under the direction of multiple
independent professional advisors (the "Trading Advisors" or the "Advisors")
applying proprietary strategies. The Fund's objective is achieving, through
speculative trading, substantial capital appreciation over time.
Merrill Lynch Investment Partners Inc. (the "General Partner"
or "MLIP") acts as the general partner of the Partnership and selects and
allocates the Fund's assets among the Advisors, each of which trades
independently of the others. Merrill Lynch Futures Inc. (the "Commodity Broker"
or "MLF") is the Partnership's commodity broker. The General Partner is a
wholly-owned subsidiary of Merrill Lynch Group Inc., which in turn is a
wholly-owned subsidiary of Merrill Lynch & Co., Inc. The Commodity Broker is an
indirect wholly-owned subsidiary of Merrill Lynch & Co., Inc. (Merrill Lynch &
Co., Inc. and its affiliates are herein sometimes referred to as "Merrill
Lynch").
The Fund offers its units of limited partnership interest
("Units"), and receives and processes subscriptions, on a continuous basis
throughout each month. Investors whose subscriptions are accepted during a month
are admitted to the Fund as Limited Partners as of the beginning of the
immediately following month, acquiring Units at the Net Asset Value per Unit as
of the date of admission. Investors' customer securities accounts are debited in
the amount of their subscriptions on a single monthly settlement date within
approximately five business days of the issuance of the Units.
When the Fund began trading in January 1994, it had an initial
capitalization of $35,835,000. A total of an additional $83,967,393 was invested
in the Units through December 31, 1996 (the last sale of Units occurred as of
September 1, 1996), and Units with an aggregate Net Asset Value of $59,470,442
had been redeemed (including December 31, 1996 redemptions which were not
actually paid out until January 1997). As of December 31, 1996, the
capitalization of the Fund was $84,173,541, and the Net Asset Value per Unit,
originally $100 as of January 4, 1994, had risen to $142.95 As of December 31,
1996, the Fund had 2,994 Limited Partners.
Through December 31, 1996, the net gain in the Net Asset Value
per Unit was 42.95%. The highest month-end Net Asset Value per Unit through
December 31, 1996 was $146.22 (November 30, 1996) and the lowest $97.36
(February 28, 1994).
(b) Financial Information about Industry Segments:
---------------------------------------------
The Partnership's business constitutes only one segment for
financial reporting purposes, i.e., a speculative "commodity pool."
(c) Narrative Description of Business:
---------------------------------
General
The Fund trades in the international futures, options on
futures and forward markets with the objective of achieving significant profits
over time.
The Fund's assets are allocated and reallocated by MLIP to the
trading management of independent Trading Advisors applying proprietary
strategies in numerous markets.
The Fund trades in diverse international futures and forward
markets with the ability rapidly to deploy and redeploy its capital across
different sectors of the global economy. These markets are traded through
futures, options on
1
<PAGE>
futures and forward contracts and offer the ability to trade either side of a
market (long or short). The Fund's use of a limited number of Advisors, and
allocation of the predominant portion of its assets to a still smaller group of
Advisors, is intended to enhance its profit potential beyond that of the broadly
diversified multi-advisor funds while retaining the potential risk control
benefits of combining independent non-correlated strategies into an overall
trading portfolio.
During its first 2 1/2 years of operation, the Fund retained
only three Advisors at any one time. Two of these Advisors remained as "core"
Advisors to the Fund as of January 1, 1997. In July 1996, MLIP began allocating
a portion of the Fund's assets (9%) to two non-core Advisors, and MLIP added a
third non-core Advisor as of January 1, 1997; however, as of January 1, 1997,
approximately 74.5% of the Fund's assets were being traded by only three
Advisors. (Core Advisors is the term used by MLIP to identify Advisors allocated
10% or more of the Fund's assets for management.)
One of the objectives of the Fund is to provide
diversification to a limited portion of the risk segment of the Limited
Partners' portfolios into an investment field that has historically often
demonstrated a low degree of performance correlation with traditional stock and
bond holdings. Since it began trading, the Fund's returns have, in fact,
frequently been significantly non-correlated (not, however, negatively
correlated) with the United States stock and bond markets.
Use of Proceeds and Interest Income
Subscription Proceeds. MLIP pays from its own funds the
---------------------
selling commissions relating to the sale of the Units. Accordingly, 100% of the
proceeds of Unit sales are received in cash by the Partnership and available for
use in its speculative trading. In such trading, the Fund's assets are not used
to purchase or acquire any asset but rather held as security for and to pay the
Partnership's trading losses as well as any expenses and redemptions. The
primary use of the proceeds of the sale of the Units is to permit the Advisors
to trade on a speculative basis in a wide range of different futures, forwards
and options on futures markets on behalf of the Partnership. While being used
for this purpose, the Partnership's assets are also generally available to earn
interest, as more fully described below under "-- Available Assets."
Market Sectors. The Partnership trades in a diversified group
--------------
of markets under the direction of multiple independent Advisors. These Advisors
can, and do, from time to time materially alter the allocation of their overall
trading commitments among different market sectors. Except in the case of
certain trading programs which are purposefully limited in the markets which
they trade, there is essentially no restriction on the commodity interests which
may be traded by any Advisor or the rapidity with which an Advisor may alter its
market sector allocations.
The Fund's financial statements contain information relating
to the market sectors traded by the Fund. There can, however, be no assurance as
to which markets may be included in the Fund's portfolio or as to in which
market sectors the Fund's trading may be concentrated at any one time or over
time.
Market Types. The Fund trades on a variety of United States
------------
and foreign futures exchanges. Applicable exchange rules differ significantly
among different countries and exchanges. Substantially all of the Fund's
off-exchange trading takes place in the highly liquid, institutionally based
currency forward markets. The forward markets are generally unregulated, and in
its forward trading the Fund does not deposit margin with respect to its
positions. The Partnership's forward currency trading is executed exclusively
through the Foreign Exchange Service Desk (the "F/X Desk") operated by MLIP and
certain of its affiliates, with MLF as the back-to-back intermediary to the
ultimate counterparties, which include Merrill Lynch Investment Bank ("MLIB")
with which the Advisors trade on behalf of the Fund.
As in the case of its market sector allocations, the Fund's
commitments to different types of markets -- U.S. and non-U.S., regulated and
unregulated -- differ substantially from time to time as well as over time. The
Fund has no policy restricting its relative commitment to any of these different
types of markets, although generally the bulk of the Fund's trading takes place
on regulated exchanges.
The Fund's financial statements contain information relating
to the types of markets traded by the Fund. There can, however, be no assurance
as to in which markets the Fund may trade or the Fund's trading may be
concentrated at any one time or over time.
2
<PAGE>
Custody of Assets. All of the Fund's assets are currently
-----------------
held in customer accounts at Merrill Lynch.
Available Assets. The Fund earns interest, as described below,
----------------
on its "Available Assets," which can be generally described as the cash actually
held by the Fund or invested in short-term Treasury bills. Available Assets are
held primarily in U.S. dollars, and to a lesser extent in foreign currencies,
and are comprised of the following: (a) the Fund's cash balance in the offset
accounts (as described below) -- which includes "open trade equity" (unrealized
gains and losses on open positions) on United States futures contracts, which is
paid into or out of the Fund's account on a daily basis; (b) short-term Treasury
bills purchased by the Fund; and (c) the Fund's cash balance in foreign
currencies derived from its trading in non-U.S. dollar denominated futures and
options contracts, which includes open trade equity on those exchanges which
settle gains and losses on open positions in such contracts prior to the closing
out of such positions. Available Assets do not include, and the Fund does not
earn interest on, the Fund's gains or losses on its open forward, commodity
option and certain foreign futures positions since such gains or losses are not
collected or paid until such positions are closed out.
The Partnership's Available Assets may be greater than, less
than or equal to the Fund's Net Asset Value (on which the redemption value of
the Units is based) primarily because Net Asset Value reflects all gains and
losses on open positions as well as accrued but unpaid expenses.
The interest income arrangements for the Partnership's U.S.
dollar Available Assets differ from those applicable to its non-U.S. dollar
Available Assets. Interest income, once accrued by the Fund, is subject to the
risk of trading losses.
Interest Earned on the Fund's U.S. Dollar Available Assets.
----------------------------------------------------------
The Fund's U.S. dollar Available Assets are held in cash in offset accounts and
in short-term Treasury bills purchased from dealers unaffiliated with Merrill
Lynch. Offset accounts are non-interest bearing demand deposit accounts
maintained with banks unaffiliated with Merrill Lynch. An integral feature of
the offset arrangements is that the participating banks specifically acknowledge
that the offset accounts are MLF customer accounts, not subject to any Merrill
Lynch liability.
MLF credits the Partnership, as of the end of each month,
with interest at the effective daily 91-day Treasury bill rate on the average
daily U.S. dollar Available Assets held in the offset accounts during such
month. The Fund receives all the interest paid on the short-term Treasury bills
in which it invests.
The use of the offset account arrangements for the
Partnership's U.S. dollar Available Assets may be discontinued by Merrill Lynch
whether or not Merrill Lynch otherwise continues to maintain its offset
arrangements. The offset arrangements are dependent on the banks' continued
willingness to make overnight credits available to Merrill Lynch, which, in
turn, is dependent on the credit standing of ML&Co. If Merrill Lynch were to
determine that the offset arrangements had ceased to be practicable (either
because ML&Co. credit lines at participating banks were exhausted or for any
other reason), Merrill Lynch would thereafter attempt to invest all of the
Fund's U.S. dollar Available Assets to the maximum practicable extent in
short-term Treasury bills. All interest earned on the U.S. dollar Available
Assets so invested would be paid to the Fund, but MLIP would expect the amount
of such interest to be less than that available to the Fund under the offset
account arrangements. The remaining U.S. dollar Available Assets of the Fund
would be kept in cash to meet variation margin payments and pay expenses, but
would not earn interest for the Fund.
The banks at which the offset accounts are maintained make
available to Merrill Lynch interest-free overnight credits, loans or overdrafts
in the amount of the Fund's U.S. dollar Available Assets held in the offset
accounts, charging Merrill Lynch a small fee for this service. The economic
benefits derived by Merrill Lynch -- net of the interest credits paid to the
Fund and the fee paid to the offset banks -- from the offset accounts have not
exceeded 3/4 of 1% per annum of the Fund's average daily U.S. dollar Available
Assets held in the offset accounts. These revenues to Merrill Lynch are in
addition to the Brokerage Commissions and Administrative Fees paid by the Fund
to MLF and MLIP, respectively.
Interest Paid by Merrill Lynch on the Fund's Non-U.S. Dollar
------------------------------------------------------------
Available Assets. Under the single currency margining system implemented for the
- ----------------
Partnership, the Partnership itself does not deposit foreign currencies to
margin trading in non-U.S. dollar denominated futures contracts and options. MLF
provides the necessary margin, permitting the Fund to retain the monies which
would otherwise be required for such margin as part of the Fund's U.S. dollar
Available Assets. Consequently, the Fund does not earn interest on foreign
margin deposits. The Fund does, however, earn interest
3
<PAGE>
on its non-U.S. dollar Available Assets. Specifically, the Fund is credited by
Merrill Lynch with interest at the local short- term rate on realized and
unrealized gains on non-U.S. dollar denominated positions for such gains
actually held in cash by the Fund. Merrill Lynch charges the Fund Merrill
Lynch's cost of financing realized and unrealized losses on such positions.
In order to avoid the expense of daily currency conversions,
the Fund holds foreign currency gains and finances foreign currency losses on an
interim basis until converted into U.S. dollars and either paid into or out of
the Fund's U.S. dollar Available Assets. Foreign currency gains or losses on
open positions are not converted into U.S. dollars until the positions are
closed. Assets of the Fund while held in foreign currencies are subject to
exchange rate risk.
Forward Transactions. Spot and forward currency contracts are
--------------------
the only non-exchange traded instruments held by the Fund.
To date, approximately 20% to 30% of the Fund's trades by
volume have been in forward currency contracts, but from time to time the
percentage of the Fund's trading represented by forward currency trades may fall
substantially outside this range. In using the F/X Desk, the Fund trades through
MLF. Because the Fund need not deposit any margin with MLF in respect of the
Fund's forward trading, the Fund's additional risk in trading in such
unregulated markets should be limited to a possible loss of unrealized profits
on open forward positions which a counterparty accessed through MLF would not,
in the event of its bankruptcy, be able to pay to MLF for the account of the
Fund (MLF not itself being obligated to pay such unrealized profits to the
Fund unless MLF is paid by MLF'S counterparty).
Having the Fund (and the other MLF clients using the F/X Desk)
trade through the F/X Desk on the basis of MLF's credit lines permits the F/X
Desk to access a wide range of counterparties without the need of such
counterparties evaluating the individual credit of the Fund (or any other MLF
client).
Charges
The following table summarizes the charges incurred by the
Fund during 1994, 1995 and 1996.
<TABLE>
<CAPTION>
1994 1995 1996
----------------------------- ------------------------------- --------------------------------
% of Average % of Average % of Average
Dollar Month-End Dollar Month-End Dollar Month-End
Cost Amount Net Assets Amount Net Assets Amount Net Assets
---------- ------------ ------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
Brokerage $3,730,625 7.02% $5,532,963 7.46% $6,646,004 7.55%
Commissions**
Administrative
Expenses** 128,642 0.24% 190,792 0.26% 57,091 0.06
Profit Shares 1,103,649 2.08% 1,492,857 2.01% 1,808,020 2.05
Incentive Override 41,867 0.08% 965,454 1.30% 834,271 0.95
------------ ------------ ------------ ------------ ------------ -------------
Total $5,004,783 9.42% $8,182,066 11.03% $9,345,386 10.61 %
============ ============ ============ ============ ============ =============
----------------------------------------
</TABLE>
** A portion of the Brokerage Commissions in prior periods have been
reclassified to conform to the current period presentation of the Administrative
fees. In addition the Fund reimbursed MLIP for a total of $447,000 of
organizational and offering costs over the first 24 months of operations (ending
December 31, 1995).
The foregoing table does not reflect the bid-ask spreads paid
by the Fund on its forward trading, or the benefits which may be derived by
Merrill Lynch from the deposit of certain of the Fund's U.S. dollar available
assets in offset accounts. See Item 1(c). "Narrative Description of Business --
Use of Proceeds and Interest Income."
4
<PAGE>
The Fund's average month-end Net Assets during 1994, 1995 and
1996 equaled $53,119,205, $74,120,244 and $87,987,052, respectively.
During 1994, 1995 and 1996, the Fund earned $1,972,722,
$3,786,925 and $3,978,137 in interest income, or approximately 3.71%, 5.11% and
4.52% of the Fund's average month-end Net Assets.
As of October 1, 1996, the 7.50% per annum Brokerage
Commissions paid by the Fund to MLF were recharacterized as 7.25% per annum
Brokerage Commissions and a 0.25% per annum Administrative Fee paid by the Fund
to MLIP. This recharacterization had no economic effect on the Fund.
------------------------------
"Breakeven Table"
<TABLE>
<CAPTION>
Column II
Column I "Breakeven"
"Breakeven" Dollar Return
Percentage Return Required
Required ($5,000 Initial Investment)
EXPENSES First Twelve Months First Twelve Months
AND INTEREST INCOME of Investment of Investment
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Brokerage Commission "Wrap Fee"(1) 7.25% $362.50
- -----------------------------------------------------------------------------------------------------------
Administrative Fee(2) 0.25% $ 12.50
- ------------------------------------------------------------------------------------------------------------
F/X Desk Service and Related Fees(3) 0.25% $ 12.50
- ------------------------------------------------------------------------------------------------------------
Profit Shares(4) 2.00% $100.00
- ------------------------------------------------------------------------------------------------------------
Incentive Override(5) 0.31% $ 15.50
- ------------------------------------------------------------------------------------------------------------
Redemption Charge(6) 3.10% $155.00
- ------------------------------------------------------------------------------------------------------------
Interest Income(7) (5.00)% $(250.00)
- ------------------------------------------------------------------------------------------------------------
RETURN ON $5,000 INITIAL
INVESTMENT REQUIRED TO 8.16% $408.00
"BREAKEVEN"
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Notes to "Breakeven Table"
(1) Brokerage Commissions include the Consulting Fees payable to
the Advisors by Merrill Lynch Futures, Consulting Fees range
from 2% to 4% per annum of Fund assets being managed,
depending on the Advisor.
(2) Beginning October 1, 1996, the annual Brokerage Commissions
payable to MLF were reduced to 7.25% from 7.50%, with 0.25%
per annum being recharacterized as an Administrative Fee
payable directly to MLIP by the Fund. This
recharacterization had no effect on investors.
(3) Estimated; paid on a per-transaction basis. The "bid-ask"
spreads paid on forward currency trades are difficult to
estimate and are not included as an expense in the "Breakeven
Table." The F/X Desk is the Foreign Exchange Service Desk
organized by MLIP through which the Fund trades forward
currency contracts.
(4) It is not possible to predict the Profit Shares which might be
paid in a "breakeven" year. MLIP believes, based on the
experience of the Fund to date, that 2.0% of average month-end
capitalization is a reasonable estimate of "breakeven" Profit
Share expense, however, actual Profit Shares could differ.
(5) No Incentive Override might, in fact, be due despite the
approximately 3.1% Net Asset Value gain necessary to offset
the redemption charge of $155 (based on an initial $5,000
investment). See "Available Assets." However, for purposes of
the "Breakeven Table," the Incentive Override has been
estimated at 10% of such 3.1% gain.
(6) Redemption charges would equal 3.1% of the initial $5,000
investment because these charges would equal 3% of the $5,155
year-end Net Asset Value necessary in order for the investor
to receive net redemption proceeds of $5,000 after
subtracting the 3% redemption charge.
(7) Estimated; based on current 91-day Treasury bill rates. Such
estimate does not reflect the economic benefit which may be
derived by Merrill Lynch from the deposit of certain of the
Fund's U.S. dollar available assets in offset accounts. See
Item 1(c), " Narrative Description of Business -- Use of
Proceeds and Interest Income -- Interest Earned on the Fund's
U.S. Dollar Available Assets."
5
<PAGE>
Description of Current Charges
<TABLE>
<CAPTION>
Recipient Nature of Payment Amount of Payment
- --------- ----------------- -----------------
<S> <C> <C>
MLF Brokerage Commissions A flat-rate monthly commission of 0.6041 of 1% of the Fund's
month-end assets (a 7.25% annual rate).
During 1994, 1995 and 1996, the round-turn (each purchase
and sale or sale and purchase of a single futures contract)
equivalent rate of the Fund's flat-rate Brokerage
Commissions was approximately $13, $88 and $74,
respectively.
MLF Use of Fund assets Merrill Lynch may derive an economic benefit from the
deposit of certain of the Fund's U.S. dollar Available
Assets in offset accounts; such benefit to date has not
exceeded 3/4 of 1% of such average daily U.S. dollar
Available Assets.
MLIP Administrative Fees As of October 1, 1996, the Brokerage Commissions payable by
the Fund were reduced from 7.50% to 7.25% annually, and the
Fund began to pay MLIP a monthly Administrative Fee equal to
0.020833 of 1% of the Fund's month-end assets (0.25%
annually). This change had no economic effect on the Fund.
MLIP pays all of the Fund's routine administrative costs.
MLIB Bid-ask spreads Under MLIP's F/X Desk arrangements, MLIB receives bid-ask
spreads on the forward trades it executes with the Fund.
Other Bid-ask spreads The counterparties other than MLIB with which the F/X Desk
Counterparties deals also each receive bid-ask spreads on the forward
trades executed with the Fund.
MLIP F/X Desk service fees Under the F/X Desk arrangements, MLIP or another Merrill
Lynch entity receives a service fee equal, at current
exchange rates, to approximately $5.00 to $12.50 on each
purchase or sale of each futures contract- equivalent
forward contract executed with counterparties other than
MLIB.
MLIB EFP differentials MLIB or an affiliate receives a differential spread for
exchanging the Fund's spot currency positions (which are
acquired through the F/X Desk, as described above) for
equivalent futures positions.
</TABLE>
-6-
<PAGE>
<TABLE>
<CAPTION>
Description of Current Charges (Cont'd)
Recipient Nature of Payment Amount of Payment
- --------- ----------------- -----------------
<S> <C> <C>
MLIP Annual Incentive Overrides Paid by the Fund as a whole on an annual basis and by
reduction of the Net Asset Value of Units when redeemed. The
Incentive Override equals 10% of any Net New Gain (as
defined). Units may generate Net New Gain and be subject to
paying an Incentive Override even though the Net Asset Value
per Unit has declined below the purchase price of such
Units.
Trading Advisors Profit Shares Prior to January 1, 1997, all Advisors received quarterly
Profit Shares ranging from 15% to 25% (depending on the
Trading Advisor) of any New Trading Profit. As of January 1,
1997, a number of Advisors agreed to receive only annual
Profit Shares. Profit Shares are also paid upon redemption
of Units. New Trading Profit is calculated separately in
respect of each Advisor, irrespective of the overall
performance of the Fund. The Fund may pay substantial Profit
Shares during periods when it is incurring significant
overall losses.
MLF; Extraordinary expenses Actual costs incurred; none paid to date, and expected to be
Others negligible.
</TABLE>
----------------------
Regulation
The General Partner, the Trading Advisors and the Commodity
Broker are each subject to regulation by the Commodity Futures Trading
Commission and the National Futures Association. Other than in respect of its
periodic reporting requirements, and the registration of the Units for
continuous public distribution under the Securities Act of 1933, the Partnership
itself is generally not subject to regulation by the Securities and Exchange
Commission. However, MLIP itself is registered as an "investment adviser" under
the Investment Advisers Act of 1940.
(i) through (xii) -- not applicable.
(xiii) The Partnership has no employees.
(d) Financial Information about Foreign and Domestic Operations
-----------------------------------------------------------
and Export Sales:
----------------
The Partnership does not engage in material operations in
foreign countries, nor is a material portion of the Partnership's revenues
derived from customers in foreign countries. The Partnership does, however,
trade, from the United States, on a number of foreign commodity exchanges.
Item 2: PROPERTIES
----------
The Partnership does not use any physical properties in the conduct of
its business.
The Partnership's only place of business is the place of business of
the General Partner (see Item 10 herein). The General Partner performs all
administrative services for the Partnership from the General Partner's offices.
-7-
<PAGE>
Item 3: LEGAL PROCEEDINGS
-----------------
There are no pending legal proceedings to which the Partnership or the
General Partner is a party.
John W. Henry & Company, Inc. ("JWH") is one of the Advisors retained
by the Fund, managing approximately 24% of the Fund's assets as of January 1,
1997. In September 1996, JWH was named as a co-defendant in class action
lawsuits brought in the California Superior Court, Los Angeles County and in the
New York Supreme Court, New York County. In November, JWH was named as a
co-defendant in a class action complaint filed in Superior Court of the State of
Delaware for Newcastle County that contained the same allegations as the New
York and California complaints. The actions, which seek unspecified damages,
purport to be brought on behalf of investors in certain Dean Witter, Discover &
Co. ("Dean Witter") commodity pools, some of which are advised by JWH, and are
primarily directed at Dean Witter's alleged fraudulent selling practices in
connection with the marketing of those pools. JWH is essentially alleged to have
aided and abetted or directly participated with Dean Witter in those practices.
JWH believes the allegations against it are without merit; it intends to contest
these allegations vigorously, and is convinced that it will be shown to have
acted properly and in the best interest of the investors.
Item 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
The Partnership has never submitted any matters to a vote of its
Limited Partners.
PART II
Item 5: MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
---------------------------------------------------------------------
(a) Market Information:
------------------
There is no established public trading market for the Units,
nor will one develop. Rather, Limited Partners may purchase or redeem Units as
of the end of each month at Net Asset Value, subject to certain early redemption
charges.
(b) Holders:
-------
As of December 31, 1996, there were 2,995 holders of Units,
including the General Partner and the Trading Advisors.
(c) Dividends:
---------
The Partnership has made no distributions since trading
commenced, nor does the General Partner presently intend to make any
distributions in the future.
-8-
<PAGE>
Item 6: SELECTED FINANCIAL DATA
-----------------------
The following selected financial data has been derived from the audited
financial statements of the Partnership.
<TABLE>
<CAPTION>
January 1, 1996 to January 1, 1995 to January 4, 1994 to
Income Statement Data December 31, 1996 December 31, 1995 December 31, 1994
- --------------------- ----------------- ----------------- -----------------
<S> <C> <C> <C>
Revenues:
Trading Profits (Loss)
Realized Gain $20,458,327 $17,455,764 $ 453,726
Change in Unrealized (Loss) Gain (3,294,990) 299,233 5,331,556
------------ ----------- ----------
Total Trading Results 17,163,337 17,754,997 5,785,282
Interest Income 3,978,137 3,786,925 1,972,722
------------ ----------- ----------
Total Revenues 21,141,474 21,541,922 7,758,004
------------ ----------- ----------
Expenses:
Brokerage Commissions 6,646,004 5,723,755 3,859,267
Administrative Fees 57,091 0 0
Profit Shares 1,808,020 1,492,857 1,103,649
Incentive Override 834,271 965,454 41,867
------------ --------- ----------
Total Expenses 9,345,386 8,182,066 5,004,783
------------ --------- ----------
Net Income $ 11,796,088 $13,359,856 $2,753,221
============ =========== ==========
<CAPTION>
Balance Sheet Data* December 31, 1996 December 31, 1995 December 31, 1994
- ------------------ ----------------- ----------------- -----------------
<S> <C> <C> <C>
Fund Net Asset Value $84,173,541 $89,140,493 $67,078,533
Net Asset Value per Unit $ 142.95 $124.35 $104.08
</TABLE>
- --------------------
* Balance Sheet Data is based on redemption values, which differ immaterially
from Net Asset Values as determined under Generally Accepted Accounting
Principles ("GAAP") due to the treatment of organizational and initial offering
cost reimbursements.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
MONTH-END NET ASSET VALUE PER UNIT
- --------------------------------------------------------------------------------------------------------------------------
Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec.
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------
1994 $ 98.60 $ 97.36 $ 98.60 $ 98.99 $102.25 $104.98 $102.64 $100.63 $102.16 $104.27 $103.89 $104.08
- --------------------------------------------------------------------------------------------------------------------------
1995 $101.22 $106.76 $116.51 $118.56 $121.04 $120.69 $116.88 $116.54 $115.14 $115.01 $117.18 $124.35
- --------------------------------------------------------------------------------------------------------------------------
1996 $125.91 $117.82 $119.43 $128.54 $123.56 $127.71 $123.72 $124.28 $128.97 $138.94 $146.22 $142.95
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Net Asset Value per Unit varies, until December 31, 1994,
from how it would be calculated for purposes of GAAP due to the amortization of
organizational and initial offering costs.
-9-
<PAGE>
Ml GLOBAL HORIZONS L.P.
December 31, 1996
Type of Pool: Selected-Advisor/Publicly-Offered/Non-"Principal Protected"/(1)/
Inception of Trading: January 4, 1994
Aggregate Subscriptions: $116,181,819
Current Capitalization: $84,173,541
Worst Monthly Drawdown/(2)/: (6.42)% (2/96)
Worst Peak-to-Valley Drawdown/(3)/: (6.42)% (2/96)
-------------
Net Asset Value per Unit, December 31, 1996: $142.95
<TABLE>
<CAPTION>
==================================================================================
Monthly Rates of Return /(4)/
- ----------------------------------------------------------------------------------
Month 1996 1995 1994
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------
January 1.25% (2.74)% (1.40)%
- ----------------------------------------------------------------------------------
February (6.42)% 5.48% (1.26)%
- ----------------------------------------------------------------------------------
March 1.37% 9.13% 1.28%
- ----------------------------------------------------------------------------------
April 7.63% 1.76% 0.40%
- ----------------------------------------------------------------------------------
May (3.87)% 2.09% 3.29%
- ----------------------------------------------------------------------------------
June 3.35% (0.29)% 2.67%
- ----------------------------------------------------------------------------------
July (3.12)% (3.15)% (2.23)%
- ----------------------------------------------------------------------------------
August 0.45% (0.29)% (1.96)%
- ----------------------------------------------------------------------------------
September 3.77% (1.21)% 1.52%
- ----------------------------------------------------------------------------------
October 7.73% (0.11)% 2.06%
- ----------------------------------------------------------------------------------
November 5.24% 1.89% (0.37)%
- ----------------------------------------------------------------------------------
December (2.24)% 6.12% 0.18%
- ----------------------------------------------------------------------------------
Compound Annual 14.96% 19.48% 4.08%
Rate of Return
==================================================================================
</TABLE>
(1) Pursuant to applicable CFTC regulations, a "Multi-Advisor"
fund is defined as one that allocates no more than 25% of its trading assets to
any single manager. As the Fund currently allocates more than 25% of its trading
assets to one or more Advisors, it is referred to as a "Selected-Advisor" fund.
Certain funds, including funds sponsored by MLIP, are structured so as to
guarantee to investors that their investment will be worth no less than a
specified amount (typically, the initial purchase price) as of a date certain
after the date of investment. The CFTC refers to such funds as "principal
protected." The Fund has no such feature.
(2) Worst Monthly Drawdown represents the largest negative
Monthly Rate of Return experienced by the Fund; a drawdown is measured on the
basis of month-end Net Asset Value only, and does not reflect intra-month
figures.
(3) Worst Peak-to-Valley Drawdown represents the greatest
percentage decline from a month-end cumulative Monthly Rate of Return without
such cumulative Monthly Rate of Return being equalled or exceeded as of a
subsequent month-end. For example, if the Monthly Rate of Return was (1)% in
each of January and February, 1% in March and (2)% in April, the Peak-to- Valley
Drawdown would still be continuing at the end of April in the amount of
approximately (3)%, whereas if the Monthly Rate of Return had been approximately
3% in March, the Peak-to-Valley Drawdown would have ended as of the end of
February at approximately the (2)% level.
(4) Monthly Rate of Return is the net performance of the Fund
during the month of determination (including interest income and after all
expenses have been accrued or paid) divided by the total equity of the Fund as
of the beginning of such month.
-10-
<PAGE>
Item 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATION
--------------------
Operational Overview; Advisor Selections
The Fund's results of operations depend on MLIP's ability to select
Advisors and the Advisors' ability to trade profitably. MLIP's selection
procedures, as well as the Advisors' trading methods, are confidential, so that
substantially the only available information relevant to the Fund's results of
operations is its actual performance record to date. However, because of the
speculative nature of its trading, the Fund's past performance is not
necessarily indicative of its future results.
In the Partnership's three years of trading through December 1996, MLIP
has made only a limited number of changes in either the Fund's Advisors or in
the allocation of its assets among them: (i) replacing a former core Advisor
(which discontinued operations) with ARA Portfolio Management Company, L.L.C. as
of January 1, 1995; (ii) allocating assets to non-core Advisors beginning July
1, 1996; and (iii) adding a third non-core Advisor as of December 1, 1996.
MLIP's decision to terminate or reallocate assets among Trading
Advisors is based on a combination of numerous factors. Advisors are, in
general, terminated primarily for unsatisfactory performance, but other factors
- -- for example, a change in MLIP's or an Advisor's market outlook, apparent
deviation from announced risk control policies, excessive turnover of positions,
changes in principals, commitment of resources to other business activities,
etc. -- may also have a role in the termination or reallocation decision. The
market judgment and experience of MLIP's principals is an important factor in
its allocation decisions.
MLIP has no timetable or schedule for making Advisor changes or
reallocations, and generally makes a medium- to long-term commitment to all
Advisors selected. In particular, MLIP has to date made significantly fewer
reallocations of trading assets and adjustments in the Advisor combinations for
the Fund than in the case of many of MLIP's multi-advisor funds. However, there
can be no assurance as to the frequency or number of Advisor changes that may
take place in the future, or as to how long any of the current Advisors will
continue to manage assets for the Partnership.
Results of Operations
General. MLIP believes that multi-advisor futures funds should be
-------
regarded as medium- to long-term (i.e., three to five year) investments, but it
is difficult to identify trends in the Fund's operations and virtually
impossible to make any predictions regarding future results based on the results
to date. An investment in the Fund may be less successful over a longer than a
shorter period.
Markets with sustained price trends tend to be more favorable to
managed futures investments than whipsaw, choppy markets, but (i) this is not
always the case, (ii) it is impossible to predict when price trends will occur
and (iii) different Advisors are affected differently by trending markets as
well as by particular types of trends.
MLIP attempts to control credit risk in the Fund's futures, forward and
options trading (the Fund does not trade derivatives other than futures and
forward contracts and options thereon) by trading only through MLF. MLF acts
solely as a broker or counterparty to the Fund's trades; it does not advise with
respect to, or direct, any such trading.
MLIP attempts to control the market risk inherent in the Fund's trading
by MLIP multi-advisor strategy and Trading Advisor selections. The market risk
to the Fund is, in any event, limited by its multi-advisor strategy. MLIP
reviews the positions acquired by the Advisors on a daily basis in an effort to
determine whether the overall positions of the Fund may have become what MLIP
analyzes as being excessively concentrated in a limited number of markets -- in
which case MLIP may, as of the next month-end or quarter-end, adjust the Fund's
Advisor combination and/or allocations so as to attempt to reduce the risk of
such over-concentration occurring in the future.
MLIP may consider making distributions to investors under certain
circumstances (for example, if substantial profits are recognized); however,
MLIP has not done so to date and does not presently intend to do so.
-11-
<PAGE>
Performance Summary
1994
Statistics. During 1994, the Fund's average month-end Net Assets
----------
equaled $53,119,205. The Fund recognized gross trading gains of $5,785,282, and
incurred Brokerage Commissions of $3,859,267, Profit Shares of $1,103,649 and
Incentive Overrides of $41,867 (or 10.89%, 7.27%, 2.08% and 0.08%, respectively,
of average month-end Net Assets). Interest income of $1,972,722 or 3.71% of
average month-end Net Assets resulted in net income of $2,753,221, and a 4.08%
increase in the Net Asset Value per Unit.
Overview. 1994 was characterized by relatively quiet markets without
--------
many major price trends. United States interest rates generally declined during
the period, and as they did, so did the U.S. dollar as compared to the
Deutschemark and certain other major currencies.
1995
Statistics. During 1995, the Fund's average month-end Net Assets
----------
equaled $74,120,244. The Fund recognized gross trading gains of $17,754,997, and
incurred Brokerage Commissions of $5,723,755, Profit Shares of $1,492,857 and
Incentive Overrides of $965,454 (or 23.95%, 7.72%, 2.01% and 1.30%,
respectively, of average month-end Net Assets). Interest income of $3,786,925 or
5.11% of average month-end Net Assets resulted in net income (without reduction
for organization and initial offering cost reimbursement payments) of
$13,359,856, and a 19.48% increase in the Net Asset Value per Unit.
Overview. In 1995, prevailing price trends in several key markets
--------
enabled the Advisors to trade profitably for the Fund. Although trading in many
of the traditional commodity markets may have been lackluster, the currency and
financial markets offered exceptional trading conditions. After months
characterized by very difficult trading environments, solid price trends across
many markets (including U.S. Treasury and non-dollar bond markets) began to
emerge during the first quarter of 1995. In the second quarter, market
volatility once again began to affect trading, as many previously strong price
trends began to weaken and, in some cases, reverse. The U.S. dollar hit new lows
versus the Japanese yen and Deutschemark before rebounding sharply. In addition,
there were strong indications that the U.S. economy was slowing which, when
coupled with a failure of the German Central Bank to lower interest rates,
stalled a rally in the German bond market. During the third quarter, there was a
correction in U.S. bond prices after several months of a strong uptrend. Despite
exposure to the global interest-rate markets, the Fund's long positions in
Treasury bonds had a negative impact on the Fund. Throughout August and into
September, the U.S. dollar rallied sharply against the Japanese yen and the
Deutschemark as a result of the coordinated intervention by major central banks
and widespread recognition of the growing banking crisis in Japan. Despite
continued price volatility during the final quarter of 1995, the Trading
Advisors were able to identify several trends in key markets. U.S. Treasury bond
prices continued their strong move upward throughout November, due both to weak
economic data and optimism on federal budget talks. As the year ended, the yield
on the 30-year Treasury bond was pushed to its lowest level in more than two
years.
1996
Statistics. During 1996, the Partnership's average month-end Net Assets
----------
equaled $87,987,052. The Fund recognized gross trading gains of $17,163,337, and
incurred Brokerage Commissions of $6,646,004, Administrative Fees of $57,091,
Profit Shares of $1,808,020 and Incentive Overrides of $834,271 (or 19.51%,
7.55%, 0.06%, 2.05% and 0.95%, respectively, of average month-end Net Assets).
Interest income of $3,978,137 or 4.52% of average month-end Net Assets resulted
in a net gain of $11,796,088 and a 14.96% increase in the Net Asset Value per
Unit.
Overview. 1996 began with the East Coast blizzard, continuing
--------
difficulties in federal budget talks and an economic slowdown having a negative
impact on many markets. The Fund was profitable in January due to strong profits
in currency trading as the U.S. dollar reached a 23-month high against the
Japanese yen. In February, however, the Fund incurred its worst monthly loss due
to the sudden reversals in several strong price trends and considerable
volatility in the currency and financial markets. During March, large profits
were taken in the crude oil and gasoline markets as strong demand continued and
talks between the United Nations and Iraq were suspended. This trend continued
into the second quarter, during which
-12-
<PAGE>
strong gains were also recognized in the agricultural markets as a combination
of drought and excessive rain drove wheat and grain prices to historic highs. In
the late summer and early fall months, the Fund continued to trade profitably as
trending prices in a number of key markets favorably impacted the Fund's
performance. In September heating oil hit a five-year high on soaring prices in
Europe, and the Fund was also able to capitalize on downward trends in the
metals markets. Strong trends in the currency and global bond markets produced
significant gains in October and November, but the year ended with declining
performance as December witnessed the reversal of several strong upward trends
and increased volatility in key markets.
PERFORMANCE OVERVIEW
The principal variables which determine the net performance of the
Partnership are gross profitability and interest income. During all periods set
forth under "Selected Financial Data," the interest rates in many countries were
at unusually low levels. This negatively impacted revenues because interest
income is typically a major component of commodity pool profitability. In
addition, low interest rates are frequently associated with reduced fixed-income
market volatility, and in static markets the Fund's profit potential generally
tends to be diminished. On the other hand, during periods of higher interest
rates, the relative attractiveness of a high risk investment such as the
Partnership may be reduced as compared to high yielding and much lower risk
fixed-income investments.
The Partnership's Brokerage Commissions and Administrative Fees are a
constant percentage of assets charge. The only Fund costs (other than the
insignificant F/X Desk service fees and EFP differentials, as well as bid-ask
spreads on forward contracts) which are not based on a percentage of the Fund's
assets are the Profit Shares payable to the Trading Advisors on an
Advisor-by-Advisor basis and the Incentive Override payable to MLIP on the basis
of overall Fund performance. During periods when Profit Shares are a high
percentage of net trading gains, it is likely that there has been substantial
performance non-correlation among the Advisors (so that the total Profit Shares
paid to those Advisors which have traded profitably are a high percentage, or
perhaps even in excess, of the total profits recognized, as other Advisors have
incurred offsetting losses, reducing overall trading gains but not the Profit
Shares paid to the successful Advisors) -- suggesting the likelihood of
generally trendless, non-consensus markets.
The events that primarily determine the Fund's profitability are those
that produce sustained and major price movements. The Advisors are generally
more likely to be able to profit from sustained trends, irrespective of their
direction, than from static markets. During the course of the Partnership's
performance to date, such events have ranged from Federal Reserve Board
reductions in interest rates, the apparent refusal of Iraq to arrive at a
settlement which would permit it to sell oil internationally, the inability of
the U.S. government to agree upon a federal budget and a combination of drought
and excessive rain negatively impacting U.S. agricultural harvesting as well as
planting. While these events are representative of the type of circumstances
which materially affect the Fund, the specific events which will do so in the
future cannot be predicted or identified.
Unlike many investment fields, there is no meaningful distinction in
the operation of the Fund between realized and unrealized profits. Most of the
contracts traded by the Fund are highly liquid and can be closed out at any
time. Furthermore, the profits on many open positions are effectively realized
on a daily basis through the payment of variation margin.
Except in unusual circumstances, factors -- regulatory approvals, cost
of goods sold, employee relations and the like -- which often materially affect
an operating business have virtually no impact on the Fund.
LIQUIDITY AND CAPITAL RESOURCES
The amount of capital raised for the Fund should not, except at
extremely high levels of capitalization, have a significant impact on its
operations. The Fund's costs are generally proportional to its asset base, and,
within broad ranges of capitalization, the Advisors' trading positions (and the
resulting gains and losses) should increase or decrease in approximate
proportion to the size of the Fund account managed by each of them,
respectively.
The Partnership raises additional capital only through the continuous
offering of its Units.
-13-
<PAGE>
Inflation per se is not a significant factor in the Fund's
profitability, although inflationary cycles can give rise to the type of major
price movements that can have a materially favorable or adverse impact on the
Fund's performance.
In its trading to date, the Fund has from time to time had substantial
unrealized gains and losses on its open positions. These gains or losses are
received or paid on a periodic basis as part of the routine clearing cycle on
exchanges or in the over-the-counter markets (the only over-the-counter market
in which the Fund trades is the inter-bank forward market in currencies). In
highly unusual circumstances, market illiquidity could make it difficult for
certain Advisors to close out open positions, and any such illiquidity could
expose the Fund to significant losses, or cause it to be unable to recognize
unrealized gains. However, in general, there is no meaningful difference between
the Fund's realized and unrealized gains.
In terms of cash flow, it makes little difference whether a market
position remains open (so that the profit or loss on such positions remains
unrealized), as cash settlement of unrealized gains and losses occurs
periodically whether or not positions are closed out. The only meaningful
difference between realized and unrealized gains or losses in the case of the
Fund is that unrealized items reflect gains or losses on positions which the
Advisors have determined not to close out (presumably, in the hope of future
profits), whereas realized gains or losses reflect amounts received or paid in
respect of positions no longer being maintained.
Item 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
The financial statements required by this Item are included in Exhibit
13.01.
The supplementary financial information ("selected quarterly financial
data" and "information about oil and gas producing activities") specified by
Item 302 of Regulation S-K is not applicable.
Item 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
---------------------------------------------------------------
FINANCIAL DISCLOSURE
--------------------
There were no changes in or disagreements with accountants on
accounting and financial disclosure.
PART III
Item 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
--------------------------------------------------
(a,b) Identification of Directors and Executive Officers:
--------------------------------------------------
As a limited partnership, the Partnership itself has no
officers or directors and is managed by the General Partner. Trading decisions
are made by the Trading Advisors on behalf of the Partnership.
The principal officers of MLIP and their business backgrounds
are as follows.
John R. Frawley, Jr. Chief Executive Officer, President
and Director
James M. Bernard Chief Financial Officer,
Senior Vice President and Treasurer
Jeffrey F. Chandor Senior Vice President, Director of
Sales, Marketing and Research and
Director
Allen N. Jones Chairman and Director
Steven B. Olgin Vice President, Secretary and
Director of Administration
-14-
<PAGE>
John R. Frawley, Jr. was born in 1943. Mr. Frawley is Chief
Executive Officer, President and a Director of MLIP as well as Co-Chairman of
MLF. He joined Merrill Lynch, Pierce, Fenner & Smith ("MLPF&S") in 1966 and has
served in various positions, including Retail and Institutional Sales, Manager
of New York Institutional Sales, Director of Institutional Marketing, Senior
Vice President of Merrill Lynch Capital Markets, and Director of International
Institutional Sales. Mr. Frawley holds a Bachelor of Science degree from
Canisius College. Mr. Frawley served on the CFTC's Regulatory Coordination
Advisory Committee from its inception in 1990 through its dissolution in 1994.
Mr. Frawley is currently a member of the CFTC's Financial Products Advisory
Committee. In January 1996, he was re-elected to a one-year term as Chairman of
the Managed Futures Association, the national trade association of the United
States managed futures industry. Mr. Frawley is also a Director of that
organization, and a Director of the Futures Industry Institute. Mr. Frawley also
currently serves on a panel created by the Chicago Mercantile Exchange and The
Board of Trade of the City of Chicago to study cooperative efforts related to
electronic trading, common clearing and the issues regarding a potential merger.
James M. Bernard was born in 1950. Mr. Bernard is Chief
Financial Officer, Senior Vice President and Treasurer of MLIP. He joined MLF in
1983. Before that he was the Commodity Controller for Nabisco Brands Inc. from
November 1976 to 1982 and a Supervisor at Ernst & Whinney from 1972 to November
1976. Mr. Bernard is a member of the American Institute of Certified Public
Accountants and holds a Bachelor of Science degree from St. John's University
and a Master of Business Administration degree from Fordham University.
Jeffrey F. Chandor was born in 1942. Mr. Chandor is Senior
Vice President, the Director of Sales, Marketing and Research and a Director of
MLIP. He joined MLPF&S in 1971 and has served as the Product Manager of Equity,
Derivative Products and Mortgage-Backed Securities as well as Managing Director
of International Sales in the United States, and Managing Director of Sales in
Europe. Mr. Chandor holds a Bachelor of Arts degree from Trinity College,
Hartford, Connecticut.
Allen N. Jones was born in 1942. Mr. Jones is Chairman and a
Director of MLIP. Mr. Jones graduated from the University of Arkansas with a
Bachelor of Science, Business Administration degree in 1964. Since June 1992,
Mr. Jones has held the position of Senior Vice President of MLPF&S. From June
1992 through February 1994, Mr. Jones was the President and Chief Executive
Officer of Merrill Lynch Insurance Group, Inc. ("MLIG") and remains on the Board
of Directors of MLIG and its subsidiary companies. In February 1994, Mr. Jones
became the Director of Individual Financial Services of the Merrill Lynch
Private Client Group. From January 1992 to June 1992, he held the position of
First Vice President of MLPF&S. From January 1990 to June 1992, he held the
position of District Director of MLPF&S. Before January 1990, he held the
position of Senior Regional Vice President of MLPF&S.
Steven B. Olgin was born in 1960. Mr. Olgin is Vice
President, Secretary and the Director of Administration of MLIP. He joined MLIP
in July 1994 and became a Vice President in July 1995. From 1986 until July
1994, Mr. Olgin was an associate of the law firm of Sidley & Austin. In 1982,
Mr. Olgin graduated from The American University with a Bachelor of Science
degree in Business Administration and a Bachelor of Arts degree in Economics. In
1986, he received his Juris Doctor degree from The John Marshall Law School. Mr.
Olgin is a member of the Managed Futures Association's Government Relations
Committee and has served as an arbitrator for the NFA.
At its December 1996 Board of Directors meeting, MLIP formed a
Finance Committee composed of representatives of several different operating and
administrative units at Merrill Lynch to oversee the financial controls and
accounting procedures implemented by MLIP. The Finance Committee will meet
periodically to review MLIP's financial reporting, monitoring and record
keeping, as well as all proposed changes -- other than the selection of Advisors
- -- affecting the operations of the Fund.
As of December 31, 1996, the principals of MLIP owned Units
with an aggregate Net Asset Value of approximately $98,636, and MLIP's general
partner interest in the Fund was valued at approximately $1.3 million.
MLIP acts as general partner to thirteen public futures funds
whose units of limited partnership interest are registered under the Securities
Exchange Act of 1934: The Futures Expansion Fund Limited Partnership, The Growth
and Guarantee Fund L.P., ML Futures Investments II L.P., ML Futures Investments
L.P., John W. Henry & Co./Millburn L.P., The S.E.C.T.O.R. Strategy Fund(sm)
L.P., The SECTOR Strategy Fund(sm) II L.P., The SECTOR Strategy Fund(sm) IV
L.P., The SECTOR Strategy Fund(sm) V L.P., The SECTOR Strategy Fund(sm) VI L.P.,
ML Principal Protection L.P. (formerly, ML
-15-
<PAGE>
Principal Protection Plus L.P.), ML JWH Strategic Allocation Fund L.P. and the
Fund. Because MLIP serves as the sole general partner of each of these funds,
the officers and directors of MLIP effectively manage them as officers and
directors of such funds.
(c) Identification of Certain Significant Employees:
-----------------------------------------------
None.
(d) Family Relationships:
--------------------
None.
(e) Business Experience:
-------------------
See Item 10(a)(b) above.
(f) Involvement in Certain Legal Proceedings:
----------------------------------------
None.
(g) Promoters and Control Persons:
-----------------------------
The General Partner is the sole promoter and controlling
person of the Partnership.
Item 11: EXECUTIVE COMPENSATION
----------------------
The officers of the General Partner are remunerated in their respective
positions. The Partnership does not itself have any officers, directors or
employees. The Partnership pays Brokerage Commissions to an affiliate of the
General Partner and Incentive Overrides and Administrative Fees to the General
Partner. The General Partner or its affiliates may also receive certain economic
benefits from holding the Fund's dollar Available Assets in offset accounts, as
described in Item 1(c) above. The directors and officers receive no "other
compensation" from the Partnership, and the directors receive no compensation
for serving as directors of the General Partner. There are no compensation plans
or arrangements relating to a change in control of either the Partnership or the
General Partner.
Item 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
(a) Security Ownership of Certain Beneficial Owners:
-----------------------------------------------
As of December 31, 1996, no person or "group" is known to be
or have been the beneficial owner of more than five percent of the Units. All of
the Partnership's units of general partnership interest are owned by the General
Partner.
(b) Security Ownership of Management:
--------------------------------
As of December 31, 1996, the following officers of the General
Partner beneficially owned the following number of Units:
Number of Percent
Name of Beneficial Owner Units Owned of Class
------------------------ ----------- --------
John R. Frawley, Jr. 500 Less than 1%
Jeffrey Chandor 50 Less than 1%
Madanda Machayya 73 Less than 1%
-16-
<PAGE>
As of December 31, 1996, the General Partner owned 8,985 Units
(unit-equivalent general partnership interests), which was less than 2% of the
total Units outstanding.
(c) Changes in Control:
------------------
None.
Item 13: Certain Relationships and Related Transactions
----------------------------------------------
(a) Transactions with Management and Others:
---------------------------------------
The General Partner acts as administrative and trading manager
of the Fund. The General Partner provides all normal ongoing administrative
functions of the Partnership, such as accounting, legal and printing services.
The General Partner, which receives the Administrative Fees, pays all expenses
relating to such services.
(b) Certain Business Relationships:
------------------------------
MLF, an affiliate of the General Partner, acts as the
principal commodity broker for the Partnership.
In 1996 the Partnership paid: (i) Brokerage Commissions of
$6,646,004 to the Commodity Broker, which included $3,122,910 in consulting fees
paid by the Commodity Broker to the Trading Advisors; (ii) Administrative Fees
of $57,091 to MLIP (the Administrative Fees only began to be paid as of October
1, 1996); and (iii) Incentive Overrides of $834,271 to MLIP. In addition, MLIP
and its affiliates may have derived certain economic benefits from maintaining a
portion of the Fund's assets in "offset accounts," as described under Item 1(c),
"Narrative Description of Business -- Use of Proceeds and Interest Income --
Interest Earned on the Fund's U.S. Dollar Available Assets" and "-- Description
of Current Charges" and Item 11, "Executive Compensation" herein.
See Item 1(c), "Narrative Description of Business -- Charges"
for a discussion of other business dealings between MLIP affiliates and the
Partnership.
The fact that MLIP receives incentive compensation from the
Partnership (which is an unusual fee arrangement for MLIP) could cause MLIP to
manage the Partnership in a more speculative and "risky" fashion than MLIP
otherwise would.
(c) Indebtedness of Management:
--------------------------
The Partnership is prohibited from making any loans, to
management or otherwise.
(d) Transactions with Promoters:
---------------------------
Not applicable.
-17-
<PAGE>
PART IV
Item 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
---------------------------------------------------------------
(a)1. Financial Statements (found in Exhibit 13.01): Page
-------------------- ----
Independent Auditors' Report 1
Statements of Financial Condition as of December 31,
1996 and 1995 2
For the years ended December 31, 1996 and 1995 and
the period from January 4, 1994 (Commencement of
Operations) to December 31, 1994:
Statements of Income 3
Statements of Changes in Partners' Capital 4
Notes to Financial Statements 5
(a)2. Financial Statement Schedules:
-----------------------------
Financial statement schedules not included in this Form 10-K
have been omitted for the reason that they are not required or are not
applicable or that equivalent information has been included in the financial
statements or notes thereto.
(a)3. Exhibits:
--------
The following exhibits are incorporated by reference or are
filed herewith to this Annual Report on Form 10-K:
Designation Description
- ----------- -----------
1.01 Selling Agreement among the Partnership, the General
Partner, Merrill Lynch Futures, the Selling Agent and
the Trading Advisors.
Exhibit 1.01: Is incorporated herein by reference from Exhibit 1.01
- ------------ contained in Amendment No. 1 to the Registration
Statement (File No. 33-62998) filed on September 10,
1993, on Form S-1 under the Securities Act of 1933
(the "Registrant's Registration Statement.")
3.01(i) Amended and Restated Certificate of Limited
Partnership of the Registrant, dated August 25, 1994.
Exhibit 3.01(i): Is incorporated herein by reference from Exhibit
- --------------- 3.01(i) contained in the Registrant's Registration
Statement.
3.01(ii) Amended and Restated Limited Partnership Agreement of
the Partnership.
Exhibit 3.01(ii): Is incorporated herein by reference from Exhibit
- ---------------- 3.01(ii) contained in the Registrant's Registration
Statement (as Exhibit A).
3.02(iii) Amended and Restated Certificate of Limited
Partnership of the Partnership, dated July 27, 1995.
Exhibit 3.02(iii): Is incorporated by reference from Exhibit 3.02(iii)
- ----------------- contained in the Registrant's report on Form 10-Q for
the Quarter Ended June 30, 1995.
-18-
<PAGE>
Designation Description
- ----------- -----------
10.01(d) Form of Advisory Agreement between the Partnership,
Merrill Lynch Investment Partners Inc., Merrill Lynch
Futures Inc. and prospective trading advisors.
Exhibit 10.01(d): Is incorporated by reference from Exhibit 10.01(d)
- ---------------- contained in the Registrant's report on Form 10-Q for
the Quarter Ended June 30, 1995.
10.02 Form of Consulting Agreement between each trading
advisor, the Partnership and Merrill Lynch Futures
Inc.
Exhibit 10.02: Is incorporated herein by reference from Exhibit
- ------------- 10.02 contained in the Registrant's Registration
Statement.
10.03 Form of Customer Agreement between the Partnership
and Merrill Lynch Futures Inc.
Exhibit 10.03: Is incorporated herein by reference from Exhibit
- ------------- 10.03 contained in the Registrant's Registration
Statement.
10.05 Form of Subscription Agreement and Power of Attorney.
Exhibit 10.05: Is incorporated herein by reference from Exhibit
- ------------- 10.05 contained the Registrant's Registration
Statement (as Exhibit D).
10.06 Foreign Exchange Desk Service Agreement, dated July
1, 1993 among Merrill Lynch Investment Bank, Merrill
Lynch Investment Partners Inc., Merrill Lynch Futures
Inc. and the Fund.
Exhibit 10.06: Is incorporated herein by reference from Exhibit
- ------------- 10.06 contained in Amendment No. 1 to the
Registration Statement.
10.07 Form of Advisory and Consulting Agreement Amendment
among Merrill Lynch Investment Partners Inc., each
Advisor, the Fund and Merrill Lynch Futures Inc.
Exhibit 10.07: Is filed herewith.
- -------------
13.01 1996 Annual Report and Independent Auditors' Report.
Exhibit 13.01: Is filed herewith.
- -------------
28.01 Prospectus of the Partnership dated December 6, 1995.
Exhibit 28.01: Is incorporated by reference as filed with the
- ------------- Securities and Exchange Commission pursuant to Rule
424 under the Securities Act of 1933, Registration
Statement (File No. 33-88994) on Form S-1, effective
December 6, 1995).
(b) Report on Form 8-K:
-------------------
No reports on Form 8-K were filed during the fourth quarter of
1996.
-19-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ML GLOBAL HORIZONS L.P.
By: MERRILL LYNCH INVESTMENT PARTNERS INC.
General Partner
By: /s/ John R. Frawley, Jr.
----------------------------------------
John R. Frawley, Jr.
President, Chief Executive Officer and
Director (Principal Executive Officer)
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed on March 14, 1997 by the
following persons on behalf of the Registrant and in the capacities indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ John R. Frawley, Jr. President and Chief Executive Officer and Director March 14, 1997
- ------------------------------
John R. Frawley, Jr.
/s/ James M. Bernard Chief Financial Officer, Treasurer (Principal Financial March 14, 1997
- ----------------------------- and Accounting Officer) and Senior Vice President
James M. Bernard
/s/ Jeffrey F. Chandor Senior Vice President and Director of Sales, March 14, 1997
- ------------------------------- Marketing and Research, and Director
Jeffrey F. Chandor
/s/ Allen N. Jones Director March 14, 1997
- ---------------------------------
Allen N. Jones
<CAPTION>
(Being the principal executive officer, the principal financial and accounting officer and a majority of the directors of Merrill
Lynch Investment Partners Inc.)
<S> <C> <C>
MERRILL LYNCH INVESTMENT General Partner of Registrant March 14, 1997
PARTNERS INC.
By: /s/ John R. Frawley, Jr.
------------------------------
John R. Frawley, Jr.
</TABLE>
20
<PAGE>
ML GLOBAL HORIZONS L.P.
1996 FORM 10-K
INDEX TO EXHIBITS
-----------------
<TABLE>
<CAPTION>
Exhibit
-------
<S> <C>
Exhibit 10.07 Form of Advisory and Consulting Agreement Amendment by and
among Merrill Lynch Investment Partners Inc., each Advisor, the Fund
and Merrill Lynch Futures Inc.
Exhibit 13.01 1996 Annual Report and Independent Auditors' Report
</TABLE>
21
<PAGE>
To the best of the knowledge and belief of the
undersigned, the information contained in
this report is accurate and complete.
James M. Bernard
Chief Financial Officer
Merrill Lynch Investment Partners Inc.
General Partner of
ML Global Horizons L.P.
22
<PAGE>
EXHIBIT 10.07
<PAGE>
FORM OF ADVISORY AND CONSULTING AGREEMENT AMENDMENT
This ADVISORY AND CONSULTING AGREEMENT AMENDMENT dated as of January 1,
1997 by and among the funds listed on Schedule I hereto (THE "FUNDS"),
________________ (THE "ADVISOR"), MERRILL LYNCH INVESTMENT PARTNERS INC.
("MLIP") and MERRILL LYNCH FUTURES INC. ("MLF")
W I T N E S S E T H
WHEREAS, the Advisor is acting as a commodity trading advisor for the Funds
pursuant to the Advisory Agreements, and in certain cases the Consulting
Agreements, among the parties hereto (as the case may be) set forth on Schedule
II hereto (collectively. the "Advisory Agreements");
WHEREAS, the parties hereto have agreed to reduce the Consulting Fees paid
by MLF, the commodity broker of the Fund, to the Advisor;
WHEREAS, the parties hereto have agreed to adjust the Profit Share paid by
the Fund to the Advisor, including, without limitation, by providing that the
Profit Share shall be calculated on an annual rather than a quarterly basis; and
WHEREAS, this Agreement shall be deemed to renew each of the Advisory
Agreements (on the terms set forth herein and therein) until December 31, 1997.
NOW THEREFORE, the parties hereto agree as follows:
1. REDUCTION OF CONSULTING FEE
---------------------------
Beginning January 1, 1997, the Consulting Fee paid by MLF to the Advisor
will be reduced to ___% per annum (0.___% of the month-end assets each month).
2. ADJUSTMENT OF PROFIT SHARE
--------------------------
From and after January 1, 1997, the Profit Share payable by the Funds to
the Advisor will be calculated at the rate of ___% of any New Trading Profit in
excess of the highest level of cumulative Trading Profit (the "high water mark")
achieved by the Advisor for each of the Funds, respectively, as of any previous
calendar quarter-end (including December 31, 1996); or $0 if the Advisor has
traded unprofitably for a Fund. Trading Profit shall be calculated pursuant to
Schedule C to the Advisory Agreements, after reduction for combined Brokerage
and Administrative Fees of ___% of average month-end assets per annum (0.__% of
the month-end assets each month). Further more, beginning January 1, 1997,
Profit Shares shall be calculated not as of the end of each calendar quarter,
but rather as of the end of each calendar year and the "high water mark" for
purposes of determining whether Trading Profit recognized after January 1, 1997
constitutes New Trading Profit
<PAGE>
will equal the highest level of cumulative Trading Profit as of any calendar
year-end (at such point, if any, that cumulative Trading Profit as of a calendar
year-end exceeds the "high water mark" in effect with respect to each Fund as of
the effective date of this Agreement).
3. TERM
----
The current term of the Advisory Agreements will expire December 31,
1997, at which time each such Advisory Agreement will be automatically renewed,
unless (i) MLIP or one or more of the Funds gives 30 days' notice to the Advisor
of the termination of such Advisory Agreement, or (ii) from and after the end of
the period during which such Advisory Agreement may be renewed at the option of
either MLIP or the affected Fund (treating the term ending December 31, 1997 as
the current twelve month term of each such Advisory Agreement) the Advisor gives
30 days' termination notice.
Any renewal rights exercisable by one or more Funds or MLIP under the
Advisory Agreements shall remain in full force and effect as if December 31,
1997 were the end of the current twelve-month term of each such Advisory
Agreement.
4. ENTIRE AGREEMENT
----------------
This Agreement, together with the Advisory Agreements, constitutes the
entire agreement among the parties hereto with respect to the matters referred
to herein, and no other agreement, verbal or otherwise, shall be binding as
between the parties unless it shall be in writing and signed by the part against
whom enforcement is sought.
-2-
<PAGE>
IN WITNESS WHEREOF, the undersigned have hereto duly set forth their hand
as of the 1st day of January 1997.
THE FUNDS LISTED ON SCHEDULE I
WHICH ARE U.S. LIMITED PARTNERSHIPS
By: MERRILL LYNCH INVESTMENT
PARTNERS INC.
General Partner
By: ______________________________
Name:
Title:
THE FUNDS LISTED ON SCHEDULE I,
OTHER THAN ML PRINCIPAL PROTECTION
PLUS LTD., WHICH ARE CAYMAN ISLANDS
INVESTMENT COMPANIES
By: ______________________________
Name:
Title:
ML PRINCIPAL PROTECTION PLUS LTD.
By: ______________________________
Name:
Title:
MERRILL LYNCH FUTURES INC.
By: ______________________________
Name:
Title:
THE ADVISOR MERRILL LYNCH INVESTMENT PARTNERS,
INC.
By: ___________________________ By: ________________________________
Name: Name:
Title: Title:
-3-
<PAGE>
SCHEDULE I
THE FUNDS
U.S. Funds Cayman Islands Funds
---------- --------------------
1. 1.
--------------------------- ---------------------------
2. 2.
--------------------------- ---------------------------
3. 3.
--------------------------- ---------------------------
4. 4.
--------------------------- ---------------------------
-4-
<PAGE>
SCHEDULE II
ADVISORY AGREEMENTS
Advisory Agreements with the U.S. Funds dated:
U.S. Fund No.
(See Schedule I)
----------------
1. ________________
2. ________________
3. ________________
4. ________________
Advisory Agreements with the Cayman Islands Funds dated:
Cayman Islands
Fund No.
(See Schedule I)
----------------
1. ________________
2. ________________
3. ________________
4. ________________
<PAGE>
ML Global Horizons L.P.
(A Delaware Limited Partnership)
Financial Statements for the years ended December 31, 1996, 1995
and the period from January 4, 1994 (commencement of operations)
to December 31, 1994 and Independent Auditors' Report
<PAGE>
To: The Limited Partners of ML Global Horizons L.P.
ML Global Horizons L.P. (the "Fund" or the "Partnership") ended its third fiscal
year of trading on December 31, 1996 with a Net Asset Value ("NAV") per Unit of
$142.95, representing an increase of 14.96% from the December 31, 1995 NAV per
Unit of $124.35. During the fiscal year, trading profits were generated in the
interest rate, currency, energy and metals sectors while losses were incurred in
the stock index and agriculture sectors.
In 1996, strong price trends prevailed in several key markets enabling the
Fund's Trading Advisors to trade profitably for the Fund. Although trading in
stock index and agricultural commodity markets may have been lackluster, the
global bond and currency markets offered substantial trading opportunities.
Interest rate and currency price trends resulted in profitable trading
opportunities in these markets throughout the year.
As the new year began, the U.S. dollar rallied throughout most of January, after
being locked in a tight trading range for the two prior months. However, the
dollar weakened against major currencies in February, and returned to a
relatively narrow trading range. In March, crude oil prices rose throughout most
of the month, as unusually cold weather in the U.S. and Europe resulted in an
extended period of strong demand and oil talks between the United Nations and
Iraq were suspended.
During April, grain and soybean prices rallied to new highs, sometimes daily, as
adverse weather conditions and strong demand affected prices. Difficult trading
conditions in many markets prevailed and a lack of clear price trends in key
markets negatively impacted the Fund's performance in May and June. For example,
U.S. bond markets remained trendless as continued volatility, reflected investor
confusion over conflicting reports on the direction of the economy.
As the third quarter of 1996 began, it was the U.S. stock market that
experienced increased volatility coupled with sharp declines in July. In the
currency markets, the U.S. dollar posted its biggest one-day gain against the
Deutsche mark in almost four months on August 14, after comments from the
Bundesbank's chief economist encouraged expectations for lower German interest
rates. In September, crude oil prices continued, as they had during the summer,
to trend upward throughout most of the month.
Despite continued price volatility during the final quarter of 1996, the Fund's
Trading Advisors were able to single out trends in key markets, such as the
world's major bond markets which rallied into October and November.
Additionally, price trends prevailed in several major foreign currency markets,
for instance, the British pound extended its rally into November, as it soared
to a 4-year high against the U.S. dollar and a 29-month high against the
Deutsche mark on November 20. In December, however, the world's major bond
market rallies came to an abrupt halt early in the month. Specifically, U.S.
Treasury prices dropped on reports of strength in the economy, as well as a
weaker dollar which further encouraged investor selling of treasury securities.
<PAGE>
1996 proved to be a profitable year for the Fund. As General Partner of the
Fund, we believe that the strategy of focused diversification positioned the
Fund to profit from a variety of trading opportunities during the year. We
continue to work diligently with the Trading Advisors to meet the Fund's
objective of achieving, through speculative trading, substantial capital
appreciation over time. We look forward to 1997 and the trading opportunities it
may bring.
Sincerely,
John R. Frawley, Jr.
President and Chief Executive Officer
Merrill Lynch Investment Partners Inc.
(General Partner)
FOR THE EXCLUSIVE USE OF INVESTORS IN ML GLOBAL HORIZONS L.P. THIS ANNUAL REPORT
IS NOT AN OFFER TO SELL NOR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES. AN
OFFER CAN ONLY BE MADE BY THE PROSPECTUS WHICH CONTAINS IMPORTANT INFORMATION
CONCERNING RISK FACTORS, PERFORMANCE AND OTHER MATERIAL ASPECTS OF THE FUND,
TOGETHER WITH RECENT MONTHLY AND ANNUAL REPORTS FOR THE FUND. THE PROSPECTUS
MUST BE READ CAREFULLY BEFORE ANY DECISION WHETHER TO INVEST IS MADE. THIS
ANNUAL REPORT MUST NOT BE REPRODUCED OR DISTRIBUTED IN ANY MANNER. FUTURES
TRADING IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK. PAST PERFORMANCE IS
NOT NECESSARILY INDICATIVE OF FUTURE RESULTS.
<PAGE>
ML GLOBAL HORIZONS L.P.
(A Delaware Limited Partnership)
------------------------------
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 1996 AND 1995 AND THE PERIOD FROM
JANUARY 4, 1994 (COMMENCEMENT OF OPERATIONS)
TO DECEMBER 31, 1994:
Statements of Financial Condition 2
Statements of Income 3
Statements of Changes in Partners' Capital 4
Notes to Financial Statements 5-11
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
- ----------------------------
To the Partners of
ML Global Horizons L.P.:
We have audited the accompanying statements of financial condition of ML Global
Horizons L.P. (a Delaware limited partnership; the "Partnership") as of December
31, 1996 and 1995, and the related statements of income and of changes in
partners' capital for the years ended December 31, 1996 and 1995 and the period
January 4, 1994 (commencement of operations) to December 31, 1994. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of ML Global Horizons L.P. as of December 31,
1996 and 1995, and the results of its operations for the years ended December
31, 1996 and 1995 and the period January 4, 1994 (commencement of operations) to
December 31, 1994, in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
February 3, 1997
New York, New York
-1-
<PAGE>
ML GLOBAL HORIZONS L.P.
(A Delaware Limited Partnership)
------------------------------
STATEMENTS OF FINANCIAL CONDITION
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
1996 1995
---- ----
ASSETS
- ------
<S> <C> <C>
Accrued interest (Note 2) $ 349,232 $ 357,496
Equity in commodity futures trading accounts:
Cash and option premiums 87,463,878 85,254,980
Net unrealized profit on open contracts 2,335,799 5,630,789
------------------------- -------------------------
TOTAL $90,148,909 $91,243,265
========================= =========================
LIABILITIES AND PARTNERS' CAPITAL
- ---------------------------------
LIABILITIES:
Redemptions payable $ 3,143,328 $ 674,724
Profit shares payable (Note 3) 1,434,200 -
Incentive override payable (Note 2) 834,271 855,796
Brokerage commissions payable (Note 2) 544,798 551,853
Administrative fees payable (Note 2) 18,771 -
Organization and initial offering costs payable (Note 1) - 20,399
------------------------- -------------------------
Total liabilities 5,975,368 2,102,772
------------------------- -------------------------
PARTNERS' CAPITAL:
General Partner (8,985 Units and 8,530 Units) 1,284,420 1,052,896
Limited Partners (579,840 Units and 737,413 Units) 82,889,121 91,708,172
Subscriptions receivable (0 Units and 29,116 Units) - (3,620,575)
------------------------- -------------------------
Total partners' capital 84,173,541 89,140,493
------------------------- -------------------------
TOTAL $90,148,909 $91,243,265
========================= =========================
NET ASSET VALUE PER UNIT $142.95 $124.35
========================= =========================
</TABLE>
See notes to financial statements.
-2-
<PAGE>
ML GLOBAL HORIZONS L.P.
(A Delaware Limited Partnership)
------------------------------
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995 AND THE PERIOD FROM
JANUARY 4, 1994 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1994
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
1996 1995 1994
---- ---- ----
REVENUES:
Trading profits (losses):
<S> <C> <C> <C>
Realized $20,458,327 $17,455,764 $ 453,726
Change in unrealized (3,294,990) 299,233 5,331,556
------------------- ------------------ ------------------
Total trading results 17,163,337 17,754,997 5,785,282
------------------- ------------------ ------------------
Interest income (Note 2) 3,978,137 3,786,925 1,972,722
------------------- ------------------ ------------------
Total revenues 21,141,474 21,541,922 7,758,004
------------------- ------------------ ------------------
EXPENSES:
Profit shares (Note 3) 1,808,020 1,492,857 1,103,649
Brokerage commissions (Note 2) 6,646,004 5,723,755 3,859,267
Incentive override (Note 2) 834,271 965,454 41,867
Administrative fees (Note 2) 57,091 - -
------------------- ------------------ ------------------
Total expenses 9,345,386 8,182,066 5,004,783
------------------- ------------------ ------------------
NET INCOME $11,796,088 $13,359,856 $2,753,221
=================== ================== ==================
NET INCOME PER UNIT:
Weighted average number of Units
outstanding (Note 4) 695,455 663,663 523,953
=================== ================== ==================
Net income per weighted average General
Partner and Limited Partner Unit $16.96 $20.13 $5.25
=================== ================== ==================
</TABLE>
See notes to financial statements.
-3-
<PAGE>
ML GLOBAL HORIZONS L.P.
(A Delaware Limited Partnership)
------------------------------
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995 AND THE PERIOD FROM
JANUARY 4, 1994 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1994
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Limited General Subscriptions
Units Partners Partner Receivable Total
----- -------- ------- ---------- -----
<S> <C> <C> <C> <C> <C>
Initial offering 358,350 $35,467,300 $ 367,700 $ - $35,835,000
Organization and initial
offering costs - (442,366) (4,634) - (447,000)
Subscriptions 317,083 31,598,577 275,531 - 31,874,108
Redemptions (30,914) (3,162,070) - - (3,162,070)
Net income - 2,722,238 30,983 - 2,753,221
---------------- --------------------- ------------------- ------------------- --------------
PARTNERS' CAPITAL,
DECEMBER 31, 1994 644,519 66,183,679 669,580 - 66,853,259
Subscriptions 298,294 35,021,556 244,397 - 35,265,953
Subscription receivable (29,116) - - (3,620,575) (3,620,575)
Redemptions (196,870) (22,718,000) - - (22,718,000)
Net income - 13,220,937 138,919 - 13,359,856
---------------- --------------------- ------------------- ------------------- --------------
PARTNERS' CAPITAL,
DECEMBER 31, 1995 716,827 91,708,172 1,052,896 (3,620,575) 89,140,493
Subscriptions 135,271 13,149,821 56,936 3,620,575 16,827,332
Redemptions (263,273) (33,590,372) - - (33,590,372)
Net income - 11,621,500 174,588 - 11,796,088
---------------- --------------------- ------------------- ------------------- --------------
PARTNERS' CAPITAL,
DECEMBER 31, 1996 588,825 $82,889,121 $1,284,420 $ - $84,173,541
================ ===================== =================== =================== ==============
</TABLE>
See notes to financial statements.
-4-
<PAGE>
ML GLOBAL HORIZONS L.P.
(A Delaware Limited Partnership)
------------------------------
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995 AND THE PERIOD FROM
JANUARY 4, 1994 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1994
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
------------
ML Global Horizons L.P. (the "Partnership") was organized as an open-end
fund under the Delaware Revised Uniform Limited Partnership Act on May 11,
1993 and commenced trading activities on January 4, 1994. The Partnership
engages in the speculative trading of futures, options on futures and
forward contracts on a wide range of commodities. The Partnership issues
new units of limited partnership interest ("Units") at Net Asset Value as
of the beginning of each month. Merrill Lynch Investment Partners Inc.
(formerly, ML Futures Investment Partners Inc.) ("MLIP or the "General
Partner"), a wholly-owned subsidiary of Merrill Lynch Group, Inc., which
in turn is a wholly-owned subsidiary of Merrill Lynch & Co., Inc.
("Merrill Lynch"), is the general partner of the Partnership, and Merrill
Lynch Futures Inc. ("MLF"), also an affiliate of Merrill Lynch, is its
commodity broker. MLIP has agreed to maintain a general partner's interest
of at least 1% of the total capital in the Partnership. MLIP and each
Limited Partner share in the profits and losses of the Partnership in
proportion to their respective interests in it.
MLIP selects independent advisors (the "Advisors" or the "Trading
Advisors") to manage the Partnership's assets, and allocates and
reallocates the Partnership's assets among existing, replacement and
additional Advisors.
Estimates
---------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements as well as the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Revenue Recognition
-------------------
Commodity futures, options on futures and forward contract transactions
are recorded on the trade date and open contracts are reflected in net
unrealized profit (loss) on open contracts in the Statements of Financial
Condition at the difference between the original contract amount and the
fair value. The change in net unrealized profit (loss) on open contracts
from one period to the next is reflected in change in unrealized in the
Statements of Income. Fair value is based on quoted market prices on the
exchange or market on which the contract is traded.
Organization and Initial Offering Costs; Operating Expenses and Selling
-----------------------------------------------------------------------
Commissions
-----------
MLIP advanced all organization and initial offering costs related to the
Partnership. The Partnership reimbursed MLIP for such costs over a
two-year period in 24 equal monthly
-5-
<PAGE>
installments. For financial reporting purposes, the Partnership deducted
the total organization and initial offering costs of $447,000 from
Partners' capital at inception. For all other purposes, including
determining the Net Asset Value per Unit for redemption purposes, the
Partnership deducted organization and initial offering cost reimbursements
only as actually paid.
MLIP pays for all routine operating costs (including legal, accounting,
printing, postage and similar administrative expenses) of the Partnership,
including the costs of the ongoing offering of the Units. MLIP receives an
administrative fee as well as a portion of the brokerage commissions paid
to MLF by the Partnership as reimbursement for the foregoing expenses.
No selling commissions have been or are paid by Limited Partners.
Income Taxes
------------
No provision for income taxes has been made in these financial statements
as each Partner is individually responsible for reporting income or loss
based on such Partner's respective share of the Partnership's income and
expenses as reported for income tax purposes.
Distributions
-------------
The Unitholders are entitled to receive, equally per Unit, any
distributions which may be made by the Partnership. No such distributions
had been made as of December 31, 1996.
Redemptions
-----------
A Limited Partner may require the Partnership to redeem some or all of
such Partner's Units at Net Asset Value as of the close of business on the
last business day of any month upon ten calendar days' notice. Units
redeemed on or prior to the end of the twelfth full month after issuance
are assessed an early redemption charge of 3% of their Net Asset Value as
of the date of redemption. If an investor acquires Units at more than one
time, such Units are treated on a "first-in, first-out" basis for purposes
of determining whether redemption charges are applicable.
Dissolution of the Partnership
------------------------------
The Partnership will terminate on December 31, 2023 or at an earlier date
if certain conditions occur, as well as under certain other circumstances,
as set forth in the Limited Partnership Agreement.
2. RELATED PARTY TRANSACTIONS
The Partnership's U.S. dollar-denominated assets are held at MLF in cash
or short-term Treasury bills. The Partnership receives all interest paid
on such Treasury bills. On the cash held at MLF, the Partnership receives
interest from Merrill Lynch at rates ranging from .50 of 1% per annum
below the prevailing 91-day Treasury bill rate up to the full prevailing
91-day Treasury bill rate. Merrill Lynch may derive certain economic
benefits, in excess of the interest which Merrill Lynch pays to the
Partnership, from possession of such cash.
Merrill Lynch credits the Partnership with interest on the Partnership's
non-U.S. dollar-denominated available assets based on local short-term
rates. Merrill Lynch charges the
-6-
<PAGE>
Partnership Merrill Lynch's cost of financing realized and unrealized
losses on the Partnership's non-U.S. dollar-denominated positions.
The Partnership paid brokerage commissions to MLF at a flat monthly rate
of .625 of 1% (a 7.5% annual rate) of the Partnership's month-end assets
allocated to trading. Effective October 1, 1996, this percentage was
reduced to .604 of 1% (a 7.25% annual rate) of the Partnership's month-end
assets allocated to trading, and the Partnership began to pay MLIP a
monthly administrative fee of .021 of 1% (a .25% annual rate) of the
Partnership's month-end assets allocated to trading (this
recharacterization had no economic effect on the Partnership). Month-end
assets are not reduced, for purposes of calculating brokerage commissions
or administrative fees, by any accrued brokerage commissions,
administrative fees, profit shares, Incentive Overrides or other fees or
charges.
MLIP estimates that the round-turn equivalent commission rate charged to
the Partnership during the years ended December 31, 1996, 1995 and 1994
was approximately $74, $88 and $13 respectively (not including, in
calculating round-turn equivalents, forward contracts on a
futures-equivalent basis).
MLF pays the Advisors annual Consulting Fees ranging up to 4% of the
Partnership's average month-end assets, after reduction for a portion of
the brokerage commissions.
The Partnership paid to MLIP an Incentive Override equal to 10% of the Net
New Gain, as defined, as of December 31, 1996, 1995 and 1994 and will do
so as of each subsequent December 31 in respect of any Net New Gain then
outstanding. Such payments are also made to MLIP from the redemption value
of Units redeemed as of the end of interim months during a year, to the
extent of any Net New Gain attributable to such Units when redeemed. Prior
to December 31, 1994, the Partnership retained any accrued Incentive
Overrides reflected as a reduction in the Net Asset Value of Units when
redeemed.
The Partnership trades forward contracts through a Foreign Exchange
Service Desk (the "F/X Desk") established by MLIP that contacts at least
two counterparties along with Merrill Lynch International Bank ("MLIB")
for all of the Partnership's currency trades. All counterparties other
than MLIB are unaffiliated with any Merrill Lynch entity. The F/X Desk
charges a service fee equal (at current exchange rates) to approximately
$5.00 to $12.50 on each purchase or sale of a futures contract equivalent
face amount of a foreign currency. No service fees are charged on trades
awarded to MLIB (which receives a "bid-ask" spread on such trades). MLIB
is awarded trades only if its price (which includes no service fee) is
equal to or better than the best price (including the service fee) offered
by any of the other counterparties contacted.
The F/X Desk trades using credit lines provided by a Merrill Lynch entity.
The Partnership is not required to margin or otherwise guarantee its F/X
Desk trading.
Certain of the Partnership's currency trades are executed in the form of
"exchange of futures for physical" ("EFP") transactions involving MLIB and
MLF. In these transactions, a spot or forward (collectively referred to as
"cash") currency position is acquired and exchanged for an equivalent
futures position on the Chicago Mercantile Exchange's International
Monetary Market. In its EFP trading, the Partnership acquires cash
currency positions through the F/X Desk in the same manner and on the same
terms as in the case of the Partnership's other F/X Desk trading. When the
Partnership exchanges these positions for futures, there is a
"differential" between the prices of these two positions. This
"differential" reflects, in part, the different settlement dates of the
cash
-7-
<PAGE>
and the futures contracts as well as prevailing interest rates, but also
includes a pricing spread in favor of MLIB or another Merrill Lynch
entity.
The Partnership's F/X Desk service fee and EFP differential costs, have to
date, totaled no more than .25 of 1% per annum of the Partnership's
average month-end Net Assets.
3. AGREEMENTS
The Partnership and the Advisors have each entered into Advisory
Agreements. These Advisory Agreements generally terminate one year after
they are entered into, subject to certain renewal rights exercisable by
the Partnership. The Advisors determine the commodity futures and forward
contract trades to be made on behalf of their respective Partnership
accounts, subject to certain trading policies and to certain rights
reserved by MLIP.
Profit shares, generally ranging from 15% to 25% of any New Trading
Profit, as defined, recognized by each Advisor considered individually
irrespective of the overall performance of the Partnership, as of the end
of each calendar quarter, are paid by the Partnership to each Advisor.
Profit shares are also paid out in respect of Units redeemed as of the end
of interim months during a calendar quarter to the extent of the
applicable percentage of any New Trading Profit attributable to such
Units.
The methods by which profit shares and the Incentive Override are
calculated may result in certain disproportionate allocations of such fees
and possible equity dilution among Partners purchasing Units at different
times.
4. WEIGHTED AVERAGE UNITS
The weighted average number of Units outstanding was computed for purposes
of disclosing net income per weighted average Unit. The weighted average
number of Units outstanding at December 31, 1996, 1995 and 1994 equals the
Units outstanding as of such date, adjusted proportionately for Units sold
and redeemed based on the respective length of time each was outstanding
during the preceding period.
5. FAIR VALUE AND OFF-BALANCE SHEET RISK
The Partnership trades futures, options on futures and forward contracts
in interest rates, stock indices, commodities, currencies, energy and
metals. The Partnership's trading results by reporting category were as
follows:
<TABLE>
<CAPTION>
Total Trading Results
---------------------------------------------------------
1996 1995
------------------------ ------------------------
<S> <C> <C>
Interest Rates $ 9,760,028 $11,850,333
Stock Indices (2,898,534) 1,309,308
Commodities (1,260,126) (2,344,653)
Currencies 6,729,908 9,620,327
Energy 3,648,527 1,362,895
Metals 1,183,534 (4,043,213)
------------------------ ------------------------
$17,163,337 $17,754,997
======================== ========================
</TABLE>
-8-
<PAGE>
Market Risk
-----------
Derivative instruments involve varying degrees of off-balance sheet
market risk, and changes in the level or volatility of interest rates,
foreign currency exchange rates or market values of the financial
instruments or commodities underlying such derivative instruments
frequently result in changes in the Partnership's unrealized profit
(loss) on such derivative instruments as reflected in the Statements of
Financial Condition. The Partnership's exposure to market risk is
influenced by a number of factors, including the relationships among
derivative instruments held by the Partnership as well as the volatility
and liquidity of the markets in which the financial instruments are
traded.
The General Partner has procedures in place intended to control market
risk, although there can be no assurance that they will, in fact, succeed
in doing so. The procedures focus primarily on monitoring the trading of
the Advisors selected from time to time by the Partnership, calculating
the Net Asset Value of the Advisors' respective Partnership accounts as
of the close of business on each day and reviewing outstanding positions
for over-concentrations--both on an Advisor-by-Advisor and on an overall
Partnership basis. While the General Partner will not itself intervene in
the markets to hedge or diversify the Partnership's market exposure, the
General Partner may urge Advisors to reallocate positions, or itself
reallocate Partnership assets among Advisors (although typically only as
of the end of a month) in an attempt to avoid over-concentrations.
However, such interventions are unusual. Except in cases in which it
appears that an Advisor has begun to deviate from past practice or
trading policies or to be trading erratically, the General Partner's
basic risk control procedures consist simply of the ongoing process of
Advisor monitoring and selection, with the market risk controls being
applied by the Advisors themselves.
Fair Value
----------
The derivative instruments used in the Partnership's trading activities
are marked to market daily with the resulting unrealized profit (loss)
recorded in the Statements of Financial Condition and the related profit
(loss) reflected in trading revenues in the Statements of Income. The
contract/notional values of open contracts as of December 31, 1996 and
1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
----------------------------------------------------- -----------------------------------------------
Commitment to Commitment to Commitment to Commitment to
Purchase (Futures, Sell (Futures, Purchase (Futures, Sell (Futures,
Options & Forwards) Options & Forwards) Options & Forwards) Options & Forwards)
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Interest Rates $163,675,871 $ 19,289,797 $366,794,659 $115,962,614
Stock Indices 2,370,250 - 5,256,825 -
Commodities 15,801,477 20,321,987 43,376,228 13,773,026
Currencies 98,847,573 98,585,409 31,823,922 113,887,626
Energy 9,062,561 - 28,209,814 -
Metals 8,173,590 36,875,178 7,101,823 23,355,741
---------------------- --------------------- --------------------- ----------------------
$297,931,322 $175,072,371 $482,563,271 $266,979,007
====================== ===================== ===================== ======================
</TABLE>
Substantially all of the Partnership's derivative instruments outstanding at
December 31, 1996 expire within one year.
-9-
<PAGE>
The contract/notional values of the Partnership's open exchange-traded and
non-exchange-traded derivative instrument positions as of December 31, 1996
and 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
----------------------------------------------------- -----------------------------------------------
Commitment to Commitment to Commitment to Commitment to
Purchase (Futures, Sell (Futures, Purchase (Futures, Sell (Futures,
Options & Forwards) Options & Forwards) Options & Forwards) Options & Forwards)
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Exchange
Traded $222,862,462 $120,557,546 $451,632,138 $210,729,655
Non-
Exchange
Traded 75,068,860 54,514,825 30,931,133 56,249,352
---------------------- --------------------- --------------------- ----------------------
$297,931,322 $175,072,371 $482,563,271 $266,979,007
====================== ===================== ===================== ======================
</TABLE>
The average fair value of the Partnership's derivative instrument positions
which were open as of the end of each calendar month during the years ended
December 31, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
----------------------------------------------------- -----------------------------------------------
Commitment to Commitment to Commitment to Commitment to
Purchase (Futures, Sell (Futures, Purchase (Futures, Sell (Futures,
Options & Forwards) Options & Forwards) Options & Forwards) Options & Forwards)
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Interest Rates $375,821,929 $235,768,354 $392,684,358 $ 52,525,025
Stock Indices 18,182,219 6,017,446 11,263,970 4,597,664
Commodities 31,215,320 16,934,584 23,210,531 11,584,575
Currencies 129,897,769 155,721,135 96,987,577 95,012,878
Energy 10,495,884 828,215 8,271,275 6,430,540
Metals 16,886,459 41,387,905 12,245,216 31,011,275
---------------------- ----------------------- --------------------- -----------------------
$582,499,580 $456,657,639 $544,662,927 $201,161,957
====================== ======================= ===================== =======================
</TABLE>
A portion of the amounts indicated as off-balance sheet risk reflects
offsetting commitments to purchase and to sell the same instrument on the
same date in the future. These commitments are economically offsetting but
are not, as a technical matter, offset in the forward market until the
settlement date.
Credit Risk
-----------
The risks associated with exchange-traded contracts are typically perceived
to be less than those associated with over-the-counter (non-exchange-traded)
transactions, because exchanges typically (but not universally) provide
clearinghouse arrangements in which the collective credit (in some cases
limited in amount, in some cases not) of the members of the exchange is
pledged to support the financial integrity of the exchange. In
over-the-counter transactions, on the other hand, traders
-10-
<PAGE>
must rely solely on the credit of their respective individual
counterparties. Margins, which may be subject to loss in the event of a
default, are generally required in exchange trading, and counterparties may
require margin in the over-the-counter markets.
The fair value amounts in the above tables represent the extent of the
Partnership's market exposure in the particular class of derivative
instrument listed, but not the credit risk associated with counterparty
nonperformance. The credit risk associated with these instruments from
counterparty nonperformance is the net unrealized profit, if any, included
on the Statements of Financial Condition. The Partnership also has credit
risk because the sole counterparty or broker with respect to most of the
Partnership's assets is MLF.
As of December 31, 1996 and 1995, $55,365,300 and $71,297,472 of the
Partnership's assets, respectively, were held in segregated accounts at MLF
in accordance with Commodity Futures Trading Commission regulations.
The gross unrealized profit and net unrealized profit (loss) on the
Partnership's open derivative instrument positions as of December 31, 1996
and 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
--------------------------------------------------- --------------------------------------------------
<S> <C> <C> <C> <C>
Gross Unrealized Net Unrealized Gross Unrealized Net Unrealized
Profit Profit (Loss) Profit Profit (Loss)
------------------------- ------------------------- ------------------------ -------------------------
Exchange-Traded $3,583,032 $2,072,327 $7,029,085 $5,952,033
Non-Exchange Traded 1,075,337 263,472 338,067 (321,244)
------------------------- ------------------------- ------------------------ -------------------------
$4,658,369 $2,335,799 $7,367,152 $5,630,789
========================= ========================= ======================== =========================
</TABLE>
The Partnership controls credit risk by dealing almost exclusively with Merrill
Lynch entities as brokers and counterparties.
The Partnership, through its normal course of business, enters into various
contracts with MLF acting as its commodity broker. Pursuant to the brokerage
arrangement with MLF, to the extent that such trading results in receivables
from and payables to MLF, these receivables and payables are offset and reported
as a net receivable or payable.
To the best of the knowledge and belief of the
undersigned, the information contained in this
report is accurate and complete.
James M. Bernard
Chief Financial Officer
Merrill Lynch Investment Partners Inc.
General Partner of
ML Global Horizons L.P.
-11-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> BD
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM STATEMENTS
OF FINANCIAL CONDITION, STATEMENTS OF OPERATIONS, STATEMENTS OF CHANGES IN
PARTNERS' CAPITAL AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000904918
<NAME> ML GLOBAL HORIZONS L.P.
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> DEC-31-1996 DEC-31-1995
<CASH> 0 0
<RECEIVABLES> 90,148,909 91,243,265
<SECURITIES-RESALE> 0 0
<SECURITIES-BORROWED> 0 0
<INSTRUMENTS-OWNED> 0 0
<PP&E> 0 0
<TOTAL-ASSETS> 90,148,909 91,243,265
<SHORT-TERM> 0 0
<PAYABLES> 5,975,368 2,102,772
<REPOS-SOLD> 0 0
<SECURITIES-LOANED> 0 0
<INSTRUMENTS-SOLD> 0 0
<LONG-TERM> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 84,173,541 89,140,493
<TOTAL-LIABILITY-AND-EQUITY> 90,148,909 91,243,265
<TRADING-REVENUE> 17,163,337 17,754,997
<INTEREST-DIVIDENDS> 3,978,137 3,786,925
<COMMISSIONS> 6,646,004 5,723,755
<INVESTMENT-BANKING-REVENUES> 0 0
<FEE-REVENUE> 0 0
<INTEREST-EXPENSE> 0 0
<COMPENSATION> 0 0
<INCOME-PRETAX> 11,796,088 13,359,856
<INCOME-PRE-EXTRAORDINARY> 11,796,088 13,359,856
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 11,796,088 13,359,856
<EPS-PRIMARY> 16.96 20.13
<EPS-DILUTED> 16.96 20.13
</TABLE>
